Australian businesses are increasingly facing difficulties protecting and enforcing intellectual property rights in China, often thwarted by counterfeiters and pirates exploiting vulnerabilities in Chinese laws and practices.
Recognising these complexities, IP Australia recently appointed an IP Counsellor to China, operating from the Australian Embassy in Beijing, to provide guidance to Australian businesses. However, government officials can only go so far and cannot provide legal advice on protecting your interests.
Our team works closely with experienced Chinese IP enforcement specialists to assist our clients in China protect and enforce their IP rights. We outline below some of the key learnings from doing so.
Pre-emptive trade mark registrations
A common practice has emerged where opportunists identify trade marks around the world and register them in China. When the legitimate foreign owner tries to launch in the Chinese market, the registered owner of the local trade mark can:
- Block the importation of legitimate goods with the aid of Chinese Customs officials;
- Threaten to sue the foreign owner for trade mark infringement; and
- Effectively hold the foreign owner to ransom for the branding rights.
Unlike Australia and many other countries, China has a ‘first to file’ trade mark system. Under this system, proprietors can register trade marks they never intend on using and enjoy superior rights compared with another trader who actually uses the trade mark.
This makes it all the more important to register your trade marks in China before someone else does. Even if China is not in your short-term strategy, securing the rights now could save a lot of hassle and expense when you are ready to expand to that market.
Establish a local brand
A Chinese language brand can be useful, and not only for the sake of being more easily recognisable in the local market. Chinese consumers have been known to give nicknames to products relying on foreign brands – and they are not always flattering! Spending time to create a suitable name that conveys the desired message may prove to be a valuable long-term marketing investment.
Although copyright protection is automatic, China has a system for registering copyright which can be a significant benefit when it comes to enforcement as a way of providing documentary evidence of your rights.
Companies seeking to do business in China should consider registering the copyright in their eligible works, such as stylised logos, labels and artwork.
Engaging commercial partners
There are many considerations for engaging suppliers, manufacturers and distributors in China. These include:
- Choosing your partners carefully. You need to be confident that they will follow through on your agreed terms, maintain the quality of the goods they make, and not exploit the trust you have placed in them. Conducting on-the-ground due diligence is key;
- Having a bilingual agreement. Alternatively, at the very least, use an agreement that reiterates the key terms in Chinese. This can be useful in ensuring the other party understands what is expected of them; and
- Conducting random, unannounced inspections. Ensure your agreement includes the right to conduct inspections of manufacturing facilities without prior warning, and exercise that right.
Counterfeiters can be evasive, illusive and use their knowledge of local protocols to evade punishment. For example, pirates have been known to obtain copyright certificates and use them to confuse authorities conducting raids, which will often be enough to halt an investigation regardless of the legal position. Engaging a seasoned expert who understands these complicated nuances can be essential to effectively enforcing your rights.
This article was written by Matt Craven, Partner, Gina Tresidder, Special Counsel, and Scott La Rocca, Senior Associate.